The Apprenticeship Levy doesn’t work
The government levy introduced to encourage new apprenticeships needs a major overhaul because it doesn’t work, according to a leading recruiter.
Lee Gamble, managing director of the national firm Berry Recruitment, said his business accumulates a sizeable fund each year that it is finding it difficult to spend.
Lee Gamble, managing director of Berry Recruitment
The Apprenticeship Levy – soon to be renamed the Growth and Skills Levy – was introduced in 2017 and it requires employers with a pay bill over £3m each year to pay a levy charged at a rate of 0.5%.
Berry Recruitment engages thousands of people each year and introduced its own apprenticeship scheme to develop consultants.
But the fund can only be spent on approved apprenticeship training and end-point assessments (EPA) using registered training providers.
The levy is also paid for temporary workers, but apprenticeship courses are often for a minimum of a year.
“Spending the levy money is very difficult,” said Lee, “and there must be millions of pounds sitting in businesses’ accounts – hiding from the economy.
“I assumed we would be able to fund all our apprenticeships with the levy money, but we can’t – it can only be spent on very specific types.
“And because we do our own in-house training we can’t use it for that either.
“Nor can we use it for our apprentices’ travel costs when they attend our head office for their bespoke recruitment training with our experienced training team.
“Another issue is that the levy we pay is also raised on the temporary workers we engage. Unfortunately, apprenticeship courses are often for a minimum of 12 months and not geared to temporary workers in short term assignments.
“Every time we engage someone, be it on a permanent or temporary contract, we pay the levy, and there it stays in a pot that just keeps growing. It is dead money and it could be helping the economy.
“Unspent funds will soon start being taken by the government after 12 months so it will act like another straightforward tax targeting businesses.
“If the government wants to improve the job and career chances of young people it needs to allow us to use the money to employ more apprentices and train them.
“Unemployment – especially youth unemployment – is growing, and the longer young people are out of work the less chance there is that they will become employed.
“I am a huge supporter of apprenticeships and if there were proper incentives in place there could be many more of them.
“With businesses being hit by increased levels of tax, NI contributions, Apprenticeship Levy, the employment rights act and ever-increasing energy costs the outlook is not favourable.
“I would like to see the government lead on apprentices by hiring more of them across local government, state institutions and central government.
“We need proper tax incentives for the hiring of apprentices and other incentives to ensure young people get into work.
“We have another problem which is the number of people in their 50s looking to retire – and these are the very people businesses need.
“Young people, with their instinct for tech, can be so valuable for a business but there are few incentives to employ them.
“The employment market needs radical change to get young people into work and keep valuable employees from retiring.
“I’d urge the government to listen to successful business people who understand how to create growth by implementing the right incentives.”
Catriona Donald, tax partner at UK top 10 accountancy and business advisory firm Azets, said: “Employing an apprentice is an investment for any and every business with positive outcomes for businesses and apprentices alike.
“Unfortunately the complex rules in England on how apprenticeship levy funds can be used mean many employers find it hard to access and use their funds. From 1st August 2026, the introduction of a new 12 month time limit to use apprenticeship levy funds, and the removal of the 10% government top-up, risk more funds going unused.
“Employers would welcome a simplified scheme with a clear purpose and rules, which allows them to flexibly fund apprenticeship training, giving young people the first step on the career ladder at a time when many are desperate to start their working lives and when opportunities to do so are sadly scarce.”